E&OE..............................................
MITCHELL:
Mr Howard, good morning.
PRIME MINISTER:
Good morning Neil.
MITCHELL:
Is there anything which is non-negotiable?
PRIME MINISTER:
Well, tax reform is non-negotiable. I mean, we obviously couldn't
agree to an outcome that didn't significantly reform the Australian
taxation system. We have clearly gone into it very committed to tax
reform. I think everybody knows where we stand, everybody knows what
our preferred option is and that is the policy we took to the people
in October of last year. We have added to it with the things that
I mentioned to Senator Harradine last Friday. But that preferred option
in its entirety is not going to get accepted because by the Parliament...
MITCHELL:
Well, what is tax reform? How do you define it?
PRIME MINISTER:
Well, a tax reform is changes that make the tax system more pro-competitive,
that make our exports cheaper, reduce our business costs....
MITCHELL:
Tax relief too for high income....
PRIME MINISTER:
...provide greater incentive to people particularly in the middle
income range. I am a great believer that you have to encourage the
aspirational side of the Australian community. You have got to look
after the poor but you have also got to encourage people who are prepared
to have a go and who want to lift their incomes, who want to perhaps
have a slightly larger home, who want more options in relation to
their children's education. There's a very strong aspirational streak
in the Australian community and I think it is something to be encouraged
and nurtured.
MITCHELL:
What is middle income then in your definition?
PRIME MINISTER:
Well, it's certainly a lot higher than $40,000 or $50,000 a household.
Bear in mind now an increasingly typical Australian household is perhaps
a husband earning $35,000 to $40,000 and his wife in a part-time job
earning $20,000 to $30,000. Now, that's not completely typical but
there are a growing number of households of which that is a fair description
and you have to take account of them.
MITCHELL:
Are the diesel fuel concessions on the table?
PRIME MINISTER:
That is an area where the Democrats want changes. We naturally are
keen to ensure that the farmers are not, relatively speaking, disadvantaged
because they are still battling although the outlook in the bush now
is a little better than what it was. And I found in Longreach earlier
this week that the farmers saw the Government as being more understanding
of their position. I mean, we would argue we always were but perception
is important and some of the seasons around the country have been
better and there's a bit more hope on the farm horizon but there are
still huge areas of difficulty and I'll be seeing some of them in
New South Wales and Victoria next week.
MITCHELL:
Does that mean the diesel fuel concessions are less urgent?
PRIME MINISTER:
No, I don't think it does mean that. The Democrats have some concerns
about the environmental aspects of that and we have commenced a discussion
on that and I am quite certain we'll have further discussions and
we're willing to talk that through in some detail. And if there are
alterations that can be made there that protect the benefit of the
rural community and also protect the reductions in business costs
then obviously we're prepared to look at them in a very positive way.
It's one of those areas where you can make some changes in relation
to the environmental effects which are consistent with the business
cost objectives that we have got.
MITCHELL:
Will the Nationals wear that?
PRIME MINISTER:
Well, it's not a question of Nationals versus Liberals. I am as a
Liberal just as committed to the bush, in fact, there are more Liberal
seats in the bush....
MITCHELL:
Sure, but we've had the leadership saying they could walk out on Coalition
if the diesel taxes were taken...
PRIME MINISTER:
I don't think we are going to have anything like that because we are
not going to do anything that would justify a Liberal or a National
member of the Ministry doing such a thing.
MITCHELL:
Is there no room for tax cuts if there is no GST?
PRIME MINISTER:
If you don't have big change the amount of tax cuts you can make are
reduced. But tax cuts are important but so is having a system that
reduces the cost of our exports. And something that reduces the price
of fuel and something that makes Australia a more attractive place
as a world financial centre.
MITCHELL:
But is it possible that in the end there could be a package with no
tax cuts?
PRIME MINISTER:
I wouldn't support that for one moment. The answer is no.
MITCHELL:
Higher level?
PRIME MINISTER:
Well, that's getting into the detail of it which, forgive me, I'd
rather not speculate about because I am trying to conduct a bona fide
negotiation. There's a lot of good faith on our part and I accept
there's good faith on the part of the Democrats. It's been constructive
but I don't want to unduly raise expectations because we still have
a long way to go and nobody should make any assumptions simply because
the first few hours produced statements to the effect that it has
been very positive and very constructive, which it was.
MITCHELL:
Last time I spoke to you, about a couple of weeks ago you said you
weren't over confident on getting the GST through. At that stage you
were negotiating with Brian Harradine. Are you more confident now
or less confident?
PRIME MINISTER:
I don't know that I would put it any more strongly than that. I was
never somebody who believed that Brian Harradine was in the bag and
you were quite right to say that I kept making that observation. Others
seemed a lot more confident than I although I had probably dealt as
successfully with Brian Harradine on other issues as anybody, perhaps
more so. I always believe that there was at the back of his mind a
cultural worry about the sort of change that we had in mind. Even
though he is somebody who in the past has respected the Government's
mandate, and I do think it weighed on him quite heavily that we had
made full disclosure of our policy before the election, and that still
remains the most disappointing part of this whole process.
MITCHELL:
The business coalition is reported today as saying that a hybrid tax
on food, sort of, half food wouldn't work. They say they'd rather
drop it, it's sort of all or nothing. Do you agree with that?
PRIME MINISTER:
Well, that's really asking me to, that gets into an area that's obviously
under a lot of discussion. Can I just say to the business community,
from our point of view the best option was the one we took to the
public. Now, we would rather get that through but it looks at the
moment as though we can't. And that if we are to have substantial
reform there'll have to be some changes. Now, the point of the negotiations
is to determine whether the sort of changes that would be necessary
to get parliamentary support so alter the package that it no longer
represents the substantial reform that we need. Now, I am, and Peter
Costello and I, are talking to the Australian Democrats about these
issues and we will be making a judgement about that. It's too early
to make that judgement.
MITCHELL:
It would seem in a sense that your words are coming back to haunt
you. I suppose that happens in politics though. I mean, food was once
totally non-negotiable.
PRIME MINISTER:
Yes, well in...if we had won the last election with a majority in
both Houses and we had been able to get support for the package we
took to the Australian people that would have remained the position.
I mean, I do not willingly...I mean, I don't like what has happened
but I am a pragmatist as well as an idealist. I mean, my ideal was,
in tax reform, was what I took to the public at the last election.
It is now plain that for everybody to see, there is no point in mincing
words about it, that we are not going to get all of that. Now, it's
a question of whether what we can get of that passes the test of substantial
beneficial tax reform. Now, if the words have come back to haunt me,
well they have, I have to live with that. I haven't changed my view
but I have to live within the constraints of the parliamentary system
under which you and I both operate.
MITCHELL:
Do you think that goes though to the credibility of yourself and Treasurer
in the public view?
PRIME MINISTER:
No, I don't think it does because I think the public still accepts
fully that the Treasurer and I wanted the package we took to the public.
So did they, they voted for it. But they understand and accept that
we can't get that through the Parliament and they therefore believe
that because change is imposed upon us by the non-Coalition majority
in the Senate, if we accept that providing it still delivers fundamental
reform then that doesn't dent our credibility.
MITCHELL:
If you don't get a GST in some form through here, is it dead forever?
PRIME MINISTER:
Well, I don't think there is any doubt that if this attempt fails
it will be the biggest setback in my political lifetime of the cause
of tax reform. I hesitate to say anything is dead forever but in any
circumstance it is always unwise isn't it.
MITCHELL:
Never ever.
PRIME MINISTER:
Well, it's always unwise. Let's put it that way. However, it would
be striking a lethal blow. I mean, I can't imagine that if this attempt
at getting tax reform up falls over I can't see anybody getting within
a bulls roar of this in the next 10 or 20 years.
MITCHELL:
And what does that do to Australia?
PRIME MINISTER:
I think it leaves us poorer economically, less competitive. I think
it loads aspirational Australians with very high levels of personal
income tax at modest income levels. It makes it much harder to attract
the brightest and the best in areas like information technology, we'll
have a bigger brain drain. You have got to think in a globalised economy
you want all these whiz bang experts, you have got to live with the
fact that salaries and tax rates in other countries are a lot more
attractive and if they are drained out of us we'll be all the poorer.
MITCHELL:
Whatever happens, you are going to have to re-negotiate with the States
aren't you? Because the deal that's been done with the States is predicated
on something which you won't have?
PRIME MINISTER:
Well, any removal has ripple effects so the answer is there could
be some ripple effects in relation to the States but the nature of
the arrangement with the States is that they are after the transitional
period substantially better off that's why they signed up.
MITCHELL:
If you can't do a deal, if you can't negotiate through the Democrats
there are two options as has been discussed there's an election or
you just say, okay that's it, we can't do it. Which is most likely?
PRIME MINISTER:
That's a very hypothetical question which I won't have a go at if
you don't mind.
MITCHELL:
Do you agree public support is swinging against the GST?
PRIME MINISTER:
Neil, I think public support ebbs and flows according to what part
of tax reform is under the spotlight. During the election campaign
what was under the spotlight was the national benefit of tax reform.
Over the last few weeks what has been under the spotlight has been
the negatives thrown up by the critics of tax reform. I don't accept
that if you had another debate on the broader aspects that the national
interest benefits wouldn't reassert themselves.
MITCHELL:
There'd be a big risk of losing an election though wouldn't there
if you had to fight one on it?
PRIME MINISTER:
Well, that's getting back to a hypothetical question. I will say this
about elections. There are certain Constitutional requirements for
resolving deadlocks between the two Houses. But we have a situation
now where it is only eight months since the last election and if you
ask me in a vacuum do I want another election, does the public want
another election. Nobody wants another election when you have only
had one eight months ago, particularly one on the same issue. So all
things being equal, what is the point of having another election?
MITCHELL:
I am told that the party's done polling which shows that support has
swung against the GST and that could cost you an election if you went
to one. Are you aware of that polling?
PRIME MINISTER:
Well, I never confirm or deny whether the party has done polling nor
what is in it if it has done it.
MITCHELL:
If this falls over, is this...I mean, the second leg of it has always
been business tax reform, do you go ahead with that or not?
PRIME MINISTER:
Oh, very difficult, almost impossible to have serious business tax
reform if this falls over. It's all of a piece and whilst it might
theoretically be possible to do so I think from a practical point
of view, no.
MITCHELL:
Are the Democrats being reasonable?
PRIME MINISTER:
All I want to say at this stage, Neil, is that we have had a good
and constructive discussion. It has been courteous and I am conducting
them in very good faith.
MITCHELL:
We'll take a quick break and come back with a couple of quick calls
on the GST then some other issues for the Prime Minister.
[Commercial break]
The Prime Minister is with me, we will take a couple of very quick
calls, please make it quick, we want to just get the point on the
GST specifically, David go ahead.
CALLER:
Mr Howard, nice to talk to you. I coincidentally had a meeting with
a couple of people from the Tax Department yesterday about the electronic
filing system that they are looking at producing and it is a fantastic
concept, it is really great because the whole basis that we came up
with is that literally you will be able to press one button and it
will file all of your monthly returns with the tax Department.
MITCHELL:
Yes, David, GST.
CALLER:
They're going down the track of trying to simplify everything for
everybody, I think we're all trying to do that. The problem with starting
to put exemptions through, this is just going to over complicate the
situation.
PRIME MINISTER:
That is a fair point. That's why our preferred option is not to have
anything other than as broadly based an indirect tax as you can, but
the political reality is that we can't at the moment muster parliamentary
support for that. Now, I can't disagree with you as an issue of principle.
That's all I can say.
CALLER:
Thanks David, thanks for calling. Just in terms of what is negotiable,
is the rate negotiable, 10 per cent?
PRIME MINISTER:
Well, that's not something that's been talked about.
MITCHELL:
Is it negotiable?
PRIME MINISTER:
Well, I certainly think it is the right level myself, that's why we
thought about all of that. We thought anything above it was too high
and we thought anything above it might be seen as lacking credibility,
anything below it lacking credibility in a general sense. But I don't
think anybody is seriously arguing that you can have a general rate
which is different.
MITCHELL:
Simon, go ahead please.
CALLER:
Well, that was my question, is it possible we can raise the rate up
to 11 / 12 per cent and drop the GST on food?
PRIME MINISTER:
I'm against that because you add further, the higher the rate, the
more you are returning to what is wrong with the present system. The
present system is that you have some very high rates of wholesale
sales tax on a limited number of items and nothing on a whole lot
of items. And that causes enormous distortions and unfairly burdens
one section of producers vis-a-vis others. So, the higher the rate,
the less credible is the reform involved in the change.
MITCHELL:
Thanks, Simon. Dawn, go ahead please.
CALLER:
Yes, Mr Howard, about three weeks ago on this station, you mentioned
self funded retirees and that they would get tax cuts. Well, I can
assure you that very few self funded retirees pay very little or no
tax because of the investments that they are in. And if people are
paying tax, well they don't have a very good financial adviser.
PRIME MINISTER:
Well, that's an interesting assertion. I can assure you that I know
lots of self-funded retirees who pay a reasonable amount of tax because
their income is above the tax free zone.
MITCHELL:
Mr Howard, how much is the food factor in the GST? I was going through
some tapes the other day and there are estimates between about $3.8
billion and $6 billion.
PRIME MINISTER:
Depends what classification you give it. If you throw in restaurant
meals and the whole shooting match, then it is much higher. If you
have a more limited definition, the Democrats have talked about the
Irish model which is essentially fresh food and anything that doesn't
involve any preparation on the vendors premises, that's the definition
that they are talking about. It's a moveable feast, dare I say it.
MITCHELL:
It's very complex when you do that.
PRIME MINISTER:
Well, that is why we have argued that you should have it across the
whole lot. I mean, you are singing my song. You have it across the
whole lot and you provide compensation to low income earners. And
the other point to be made is that if food is out that does confer
a benefit on high income earners as well as low income earners because
high income earners even in the fresh food category tend to eat more
expensive food.
MITCHELL:
Does the negotiations going on at the moment, does it start at the
point of including, I think it was $1.5 billion as negotiated with
Brian Harradine? Is that there?
PRIME MINISTER:
Well, the position in relation to that is that we were willing to
put that on top of the package we took to the public at the election,
now obviously if you start taking bits of what we put to the public
at the election away, and you start ruling things out, you don't automatically
just leave that additional compensation exactly where it is, that
really in a sense comes back onto the table. But our position is that
if in the end what is put to the Parliament is the package that we
put to the public at the last election, then we would add to that
what I outlined to Senator Harradine.
MITCHELL:
Is there a chance that we are going to muck this up? With a hybrid
or with nothing?
PRIME MINISTER:
We will end up with a second best although perhaps not too far behind,
but nonetheless a second best system, by not embracing what the public
voted for last October. I wouldn't say at this stage we're going to
muck it up because if I thought we were in a situation where we were
going to be mucking it up I wouldn't be involv